If a firm increases its prices when the demand is inelastic, then the firm will see
A)an increase in revenues.
B)a decrease in revenues.
C)no change in revenues.
D)no effect on the sales of its product.

Question

Quizplus · Accepted Answer

When demand is inelastic, it means that consumers are not very responsive to changes in price, and will continue to purchase the product even if the price has increased. Therefore, if the firm increases its prices, it will not see a large decrease in the quantity of products sold. Instead, the firm will see an increase in revenues since they are able to charge higher prices without losing many customers.

If a Firm Increases Its Prices When the Demand Is